I draw like a child.
An innovation explosion is happening. Units of value across every industry, product, and service are becoming smaller and more configurable. Every area of life and commerce is being changed. Education, employment, media, finance, marketing, retail, technology, transport, energy, investing, and even healthcare. A reduction in size of ‘tradeable units’ creates new configurations of products, services, and businesses, at a rate, that plotted on a curve, looks exponential. This is a very good thing. As it can help solve some of the biggest issues facing humanity: Climate Change (September 2020 was the hottest year on record ever) Hysteria (media is creating a new virtual reality of contagious, hysterical reactions by governments and people), massive loss of old jobs and reskilling for new ones.
What’s happening: Hyperconnectivity
Software applications connected to the internet, tethered to mobile devices means everyone is connected all of the time. To each other and as many services as they want, globally. Creating an infinity of interactions and data. This data and interactions (which include commerce) can be chopped up across many new dimensions to form millions of different market slices and many more millions of new products.
Atomization of Audience
It is possible to make profits from very niche segments of a population, with even narrower interests. For example, people who only like red dresses and country music, enjoy live events, in their 40’s can be identified and marketed to.
Atomization of Services
In addition not only can audiences be fragmented into micro-niche markets where the juice is still worth the squeeze, but the services they buy can be fractionalized into smaller services too. Capturing a smaller share of each person’s/company’s spending power can work if there is enough of them/or it is recurring. (Sell something for $10 to 100K people in a month is $1M, do it recurring and it’s $12M per annum).
You can now rent dresses for just a single-use rather than own them (Rent the Runway). Purchase a fraction of a share in Apple (Robin Hood). Rent a room in a house rather than the whole house (Airbnb). Buy access to just one TV channel (Apple TV), not have to purchase a bundle. Buy online processing power per calculation/service and not have to own the computer (Amazon Web Services).
Atomization of Cost
More and more what was previously an upfront cost can become a pay as you use it cost. And that is in both B2C and B2B arenas. Which removes the risk in starting or trying something new. And increases the ability to launch new businesses before investing heavily. An example is Google Cloud, with over 100 micro-services you can pay for as you use them.
Atomization of Attention
Our ultimate currency is time. We convert it into money through exchanging our services and others convert it into money through grabbing our attention. There is increased competition for our time. Hundreds of millions of people are now producing content and have become their own media companies. Many have their face on a screen for more waking hours a day than outside of a screen (work computer, mobile, tablet, TV). We are all consuming more content including mainstream media, gaming & social media platforms ( the average user of Whatsapp opens it 25-35 times per day).
The result in this increased supply in an on-demand world is heightened impatience! Meaning we want the exec summary, the ‘Redbull version’ of the song, not the whole thing. Blinkist allows micro-consumption of books and is a great example of resultant products forming on the back of this increasing demand for our attention.
I want to tip a hat to bundling and unbundling as concepts in business strategy. Which is a good lens to view the atomization of value chains. But shouldn’t be confused as the same thing. Stratechery writes about it here.
Trends driving Atomization
SaaS, social networks, user-generated content (UGC), media & commerce creation platforms, online marketplaces, subscriptions, mobile, data, the decline of cash, fintech, the non-code movement, machine learning, & AI. Underlying everything is the continued accelerating benefits of technology. All these trends drive greater ability to fragment existing audiences, value chains, products, and services.
Ultimately an economy is made up of transactions. Which happens between people and organizations purchasing products and services and trading time and attention. Breaking down into smaller units creates more network connections and transactions at exponential rates.
Winners
Creators with new world and old-world skills can earn income from their passions. Large platforms will enable millions to succeed but also capture most of the upside. Companies using machine learning and AI that mass personalize, automate, and predict, will take and create the new platform master-positions.
Market Entry
If you are launching a business, you can define an audience with great detail across new markets and existing market slices, using criteria not previously available. You can serve customers in part, not just the whole. And you can insert your product and micro-products into the value chain in places previously inaccessible and unimagined.